Just five days after filing for bankruptcy, FTX transferred $10 million from its Dubai subsidiary to an opaque US firm owned by the crypto exchange founder’s hedge fund, Alameda Research.
That’s according to screenshots of documents seen by DL News. The documents, shared by a company insider, show a Commercial Bank of Dubai transfer from FTX’s Dubai subsidiary, FTX FZE, to Alameda-owned North Dimension on November 16.
The transfer highlights the role of North Dimension, an obscure electronics site owned by Alameda, in the US Securities and Exchange Commission’s case against FTX. The SEC alleges the exchange used North Dimension to mask transactions between FTX and Alameda. FTX founder Sam Bankman-Fried has pleaded not guilty to criminal charges that he used FTX customer deposits to prop up Alameda. A trial is set for October 2.
Attorney John Ray III was appointed as chief of FTX in the fallout of its bankruptcy filing.
“If John Ray authorised this, it’s fine. If not, it’s embezzlement and bankruptcy fraud,” J.W. Verret, a professor of securities law at George Mason Law School, told DL News. “I have a hard time seeing a bank approve that wire after the bankruptcy was filed, unless John Ray approved it.”
Adam Landis, partner of Landis Rath & Cobb LLP, who filed the Chapter 11 proceedings on behalf of FTX, and Andrew G. Dietderich, partner of Sullivan & Cromwell, who is leading the team advising FTX, did not respond to requests for comment. One document shows the Swift transfer to North Dimension was received by JPMorgan Chase. JPMorgan declined to comment.
Only last week did a US attorney request that Bankman-Fried’s bail terms be amended to prohibit him from “accessing or transferring any assets” tied to FTX or its affiliated entities.
North Dimension Inc was founded in August 2020 — its now defunct site described itself as the world’s “top e-commerce site for consumer electronics.” The SEC said in a December 21 complaint that the site didn’t disclose any links to the hedge fund, and that “Bankman-Fried directed FTX to have customers send funds to North Dimension in an effort to hide the fact that the funds were being sent to an account controlled by Alameda.”
The US Commodity Futures Trading Commission on December 21 called North Dimension a “Delaware-registered wholly-owned subsidiary of Alameda” which “deliberately did not have a name that was readily-identifiable” with the hedge fund.
After the FTX FZE transfer of $10 million to North Dimension, one of the documents shows the accounts as “restricted,” which the FTX insider said may imply that the UAE authorities froze them. The remaining assets were worth about $460,000.
FTX FZE has at least three bank accounts in Dubai under its name - two denominated in dollars and one in United Arab Emirates dirham, according to the documents.
One account was opened on August 16. It received an almost $5 million deposit the next day, and now holds about $460,000. The account in dirham, opened on August 16, was also empty. Another dollar account, also empty, was opened on September 23.
Abdallah Mohamad, FTX’s relationship manager at the Commercial Bank of Dubai, did not respond to a request for comment.
FTX FZE has operated under a limited licence since July to serve qualified investors and institutions in the region.
North Dimension’s incorporation papers were prepared by Fenwick & West, where Daniel Friedberg, FTX’s chief regulatory officer, was employed, according to NBC News. Friedberg was previously an executive at a software company that ran a poker website called Ultimate Bet, which collapsed in 2011 after it emerged that it let insiders enter a “God Mode” and place winning bets. According to Reuters, Friedberg is cooperating with prosecutors in the FTX case.
FTX FZE and North Dimension are among the more than 130 entities listed in FTX’s Chapter 11 filings - part of the expansive network of associated companies and subsidiaries connected to the collapsed exchange.
FTX FZE, also known as FTX MENA, has a brief history in the United Arab Emirates. The UAE is among the top 10 jurisdictions most affected by the exchange’s bankruptcy - 4% of FTX’s customers are in the country, Bloomberg reported, citing filings.
The UAE’s Virtual Assets Regulatory Authority, which regulates crypto matters in the country, suspended FTX FZE’s licence in November after approving it in July.
FTX FZE “had not received VARA approval to commence operations, onboard clients or service the market in the MVP Phase of the regulatory regime,” VARA said in a statement about the suspension, adding that a “client money account with a domestic bank account had also not been secured.” VARA said the unit “is confirmed to have no client exposure.”
VARA declined to comment beyond the statement on its website.